Environmental warranties in the courts
2nd September, 2021
Environmental warranties have rarely been considered in the courts; however, a recent example is MDW Holdings Ltd v Norvill  EWHC 1135 (Ch).
The High Court upheld a buyer’s claims that the sellers had breached various warranties, including environmental warranties in the share purchase agreement (SPA). These breaches included compliance with environmental permits, consents required for the operation of its business and environmental law.
The buyer’s main claim was for breach of warranties in the SPA. The buyerargued that due to the non-compliant environmental practices, concealment, and failure to disclose those practices the sellers were in breach of the warranties within the SPA.
The buyer alleged that the target company had been breaching environmental law and avoiding the costs of environmental compliance. This in turn increased the company’s profit to levels it would not have reached had it acted lawfully.
The court awarded damages of £382,600 jointly and severally against the sellers. The decision was largely dependent on its own facts and is a relatively rare example of a breach of warranty claim in relation to environmental warranties.
Sellers should ensure that the SPA includes language which is expressly aimed at preventing liability in misrepresentations such as:
- A non-reliance statement recognising that the buyer has not relied on any representations in entering into the agreement.
- A no representation statement recognising that seller has not made any representations in the run-up to entering into the agreement.
- An express exclusion of liability for misrepresentation for both pre-contractual statements and any statements that are set out in the SPA.
- An express waiver of non-contractual remedies.
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